US equity markets edged higher on Friday in choppy trading, marking a cautious start to 2026 as investors navigated thin liquidity and mixed sector performance. Activity remained muted on the first trading day of the year, with technology stocks driving most of the intraday swings following the New Year holiday closure on Thursday.
The S&P 500 added 12.97 points, or 0.2%, to close at 6,858.47, building on a strong 2025 that saw the benchmark rise more than 16%. The Dow Jones Industrial Average outperformed, gaining 319.10 points, or 0.7%, to 48,382.39, while the Nasdaq Composite slipped 0.1% to 23,235.63, weighed down by losses in several mega-cap technology names.
Technology stocks drive early-year volatility
The technology sector remained at the center of market movements, continuing the pattern that pushed US equities to record highs throughout 2025. Shares of Nvidia rose 1.3%, providing the strongest upward support for the broader market as investor optimism around artificial intelligence-related demand remained intact.
That strength was partly offset by a 2.2% decline in Microsoft, while Tesla fell 2.6% after reporting a second consecutive annual decline in vehicle sales. Given their massive market capitalizations, Nvidia, Microsoft, and Tesla exert an outsized influence on index performance, often amplifying short-term volatility as their shares fluctuate.
Sector rotation and global market strength
Outside of big tech, furniture and home goods stocks posted notable gains after US President Donald Trump announced a delay in planned tariff increases on upholstered furniture. RH surged 8%, while Wayfair climbed 6.1%, as investors reassessed cost pressures tied to trade policy.
International markets showed comparatively stronger momentum. Equity benchmarks in the United Kingdom and South Korea reached record highs, reflecting more upbeat sentiment abroad. In Asia, technology-related shares also advanced, with Alibaba gaining 4.3% and Baidu jumping 9.4% in Hong Kong after Baidu announced plans to spin off its AI chip unit, Kunlunxin, with a potential Hong Kong listing targeted for early 2027, subject to regulatory approval.
Commodities and bonds reflect cautious sentiment
In commodities, price action was subdued. US crude oil slipped 0.2% to $57.32 per barrel, while Brent crude fell by the same margin to $60.75. Gold prices eased 0.3%, signaling limited demand for traditional safe havens.
US Treasury yields were little changed, reflecting a wait-and-see stance from bond investors. The 10-year Treasury yield edged up to 4.19% from 4.17%, while the 2-year yield held steady at 3.48%, closely aligned with expectations for Federal Reserve policy.
Focus shifts to key US data and Fed outlook
Markets are expected to regain momentum from Monday as the first full trading week of the year brings a series of closely watched US economic releases. Upcoming data will include private-sector reports on services activity and consumer sentiment, alongside government labor market updates. These releases will be among the final major inputs the Federal Reserve considers ahead of its late-January policy meeting.
The Fed faces a delicate balancing act after cutting interest rates three times toward the end of 2025 to support a weakening labor market. Inflation remains above the central bank’s 2% target, and further easing risks reigniting price pressures at a time when consumers are already cautious amid persistent inflation and ongoing global trade tensions.
Against this backdrop, Wall Street largely expects the Fed to keep its benchmark interest rate unchanged at its January meeting, reinforcing the cautious tone that has defined the opening days of 2026.
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